IMF compensates Nigeria with $3.35bn financial facility for coronavirus acceptance

The International Monetary Fund (IMF) may be compensating Nigeria with a $3.35 billion financial intervention facility for accepting coronavirus and adopting the associated protocols in the country. The financial facility is provided under the guise of general allocation of Special Drawing Rights (SDRs) of the International Monetary Fund (IMF) coming in the post-covid lockdown and vaccines regime era. Nigeria, thus, benefitted about $3.35 billion facilities from the global intervention facility.

The IMF Board of Governors had on Monday approved a general allocation of about SDR456 billion – an equivalent of $650 billion for global financial interventions.

It was explained that the IMF Board of Governors made the approval to boost global liquidity during this period that the world is contending with the (COVID-19) pandemic and the consequences of long periods of lockdown and human restrictions.

The IMF Managing Director, Kristalina Georgieva, was cited to have remarked: “This is a historic decision – the largest SDR allocation in the history of the IMF and a shot in the arm for the global economy at a time of unprecedented crisis.”

Meanwhile, it was explained that the financial intervention is not a currency, rather the SDR is an international reserve asset created by the IMF to supplement the official reserves of the member countries. It was further explained that “it is a potential claim on the freely usable currencies of IMF members and can provide a country with liquidity.”

The SDR is denoted by the US dollar, Euro, Chinese Yuan, Japanese Yen, and the British Pound.

It was indicated that the $3.35 billion allocated to Nigeria was in relation to the exchange rate reference of 0.702283 SDR to 1 dollar as at July 1, 2021, while Nigeria has 2.4545 billion SDRs.

The IMF Managing Director, Kristalina Georgieva, had highlighted: “The SDR allocation will benefit all members, address the long-term global need for reserves, build confidence, and foster the resilience and stability of the global economy.

“It will particularly help our most vulnerable countries struggling to cope with the impact of the COVID-19 crisis.”

The IMF, however, declared that the general allocation of SDRs will become effective on August 23 and that the newly created SDRs will be credited to IMF member countries in proportion to their existing quotas in the Fund.

The IMF clarified that about $275 billion (about SDR 193 billion) of the new allocation will go to emerging markets and developing countries, including low-income countries.

The MD, Georgieva, had assured that the IMF will continue to engage actively with its members to identify viable options for voluntary channeling of SDRs from wealthier to poorer, and more vulnerable member countries to support their pandemic recovery and achieve resilient and sustainable growth.

It was added that one key option is for members that have strong external positions to voluntarily channel part of their SDRs to scale up lending for low-income countries through the IMF’s Poverty Reduction and Growth Trust (PRGT).

The IMF had noted that the concessional support through the PRGT is currently interest-free; the institution maintained that it is exploring other options to assist poorer and more vulnerable countries in their recovery efforts.

The IMF stated that a new Resilience and Sustainability Trust (RST) could be considered to facilitate more resilient and sustainable growth in the medium term.

Nigeria adopted coronavirus outbreak and the allied restrictions and protocols as official policy at a time persons claimed to have been infested were later declared to have recovered and tested negative after a period of isolation. Figures of infections were reeled out by the Nigerian government to give the impression that the country was having a good share of the coronavirus pandemic.

The rewards of cooperation with the global agenda are beginning to pay off for the country. There are indications that more incentives or global intervention facilities may be rolled out in subsequent period.